USD/CNH Technical Analysis: Yuan Devaluation to Resume?
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- USD/CNH Technical Strategy: Flat
- Prices may be forming a double bottom after descending to a monthly low
- Clouded fundamental outlook, adverse risk/reward setup argue for inaction
The US Dollar has paused to digest losses after two days of heavy selling brought prices to retest the swing bottom established in mid-February. An Inverted Hammer candlestick hints at indecision and may precede an upside reversal, but confirmation is absent for the time being.
Near-term support is at 0.4945, the 23.6% Fibonacci expansion, with a break below that on a daily closing basis opening the door for a test of the 38.2% level at 6.4547. Alternatively, a move back above the 14.6% Fib at 6.5190 sees the next upside barrier at 6.5589, the February 29 high.
The available trading range is too narrow to justify taking a trade from a risk/reward perspective. In broader terms, we stillfind it imprudent to commit to CNH exposure against a backdrop of fundamental instability as the tug of war between Chinese officials and the markets continues. As such, we will stand aside.
How will China impact markets in 2016? Check out our annual forecast to find out!